Sustainable investment with strategic orientation

Corporate sustainability has reached the core of society. It is no longer seen as an optional set of tasks separate from key economic activities, but as a critical commitment for the private sector. Although this entails more responsibility for businesses, it also brings new opportunities for investors.

Promoting sustainability, safeguarding investments sustainably

In each concrete investment decision, what is known as “double materiality” comes into play: investors can focus on the impact companies have on sustainable development; or they can concentrate their assessment on future sustainability-related risks and opportunities that influence the economic outlook of companies in their portfolio.

How much emphasis is placed on one perspective over the other, and whether to invest in companies that are already sustainable or still at the beginning of their sustainability journey, but show clear progress, are some of the strategic questions that sustainable investors should ask themselves.

Once the strategic direction has been set, finding the right mix of instruments is important. Should investors apply exclusion criteria, integrate sustainability criteria into the “normal” investment decision process, practice impact investing focused on sustainable development goals, or meaningfully combine all of these? An overview of the options, such as that offered by the industry association Swiss Sustainable Finance, can provide assistance.

“The tasks are great, as are the opportunities.”

What do companies have to contribute, and what is the role of financial service providers?

Sustainability aspects can only be factored into investing if companies across all industries manage these aspects more effectively and report on them transparently.

In Switzerland, related requirements are expected to increase after the vote on the corporate responsibility initiative, regardless of its outcome. In the EU, it is already clear that companies will be expected to report their share of sales in the future from activities that align or diverge from climate targets. In other areas such as biodiversity, water protection, recyclability, human rights and working conditions, these requirements will not be long in coming. These expectations are largely driven by the EU Action Plan Sustainable Finance, which obliges financial service providers to take sustainability issues into account in the investment process, risk management and customer advisory services. The foundations for this, however, will rely on companies providing better information.

From our consulting work, we know that even the best-managed companies and financial service providers have a lot of catching up to do in terms of sustainability. The tasks are great, as are the opportunities. An economy that is sustainable in the long term can be expected to not only conserve our resources but—under changed framework conditions—also be more profitable and crisis-proof.

The original article entitled “Sustainable Investment with strategic orientation” was published in the Swiss Yearbook Sustainable Investment 2021 on October 1, 2020.

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